Federal Reserve Balance Sheet Update: Week Of December 16: $64 Billion Drop In Excess Reserves Provides Turbo Liquidity

At this point the weekly updates of the Fed's balance sheet are becoming more or less an autopilot issue: each week the Fed will add between $25 and $30 billion of Treasuries, with the only real question becoming how much mortgages are being prepaid, and what is the incremental liquidity boost due to the weekly change in excess reserves. But before getting into those, here is a broad look at how the Fed's balance sheet looked as of close today (including today's $6.8 billion POMO).

All numbers as of December 16:

• Securities
  held outright: $2,124 billion, $4 billion more than the week prior.
  • Total

    Treasury holdings increased
    from $950 billion to $974 billion (inclusive of today's POMO).

  • MBS
    holdings declined from $1.023 trillion to $1.009 trillion. December through January.
    
  • Agency holdings were flat at $148 billion.
• Net
  borrowings: flat at
  $46 billion.
• Float,
  liquidity
  swaps, Maiden Lane and other assets: $197
  billion, $3 billion more than a fortnight ago. FX liquidity swaps were at $60
  million as that one bank continues to borrow the same amount for 3
  months now, even thought as of this week it bumped up its borrowings to $75 million. The value of Maiden
  Lane I declined slightly to $26.9 billion. Maiden Lane II was at $16.1 billion, Maiden Lane III at $23.1
  billion, while AIA Aurora was $26
  billion. 
• The monetary base was $2.030 trillion.
• Reserve

  balances with banks: $994 billion, a decline of $64 billion from last
  week, and an incremental source of money for the Primary Dealers with which to
  chase risk.

• Foreign holdings of USTs and MBS were $3.34 trillion, an increase of $1.5 billion W/W, and a reversion of the drop in foreign custodial holdings from two weeks ago.

There are two things we would like to highlight in the data above:

• The decline in excess reserves was substantial, amounting to $64 billion in the week. This is liquidity that Primary Dealers could use in addition to POMO liquidity to goose up markets. In other words, there was about an incremental $100 billion in additional liquidity made available to prop desks to buy risky assets.

• The anticipated slow-down in putbacks to the Fed due to spiking interest rates is not occuring as can be seen on the chart below. Roughly $12 billion in MBS/agencies are put back to Brian Sack every two weeks, and the trend does not show any sign of slowing. This can be seen on the chart below.

And, as usual we end with our favorite chart, showing total UST holdings by the top 5 world institutions.

Comments

[malusDiaz]

How much damage has the Silver shortage caused? Selling winners to pay for the losers ...

Only this time its treasuries for gold, not gold for treasuries (a-la-2008)

[Lady Heather...UNCLE]

this is a little off topic and might sound naive but here goes: "How does the Fed purchasing anything with a coupon cost the taxpayer money'?  The Fed after all is not a federal agency. I can see that inflating money supply by 'printing' FRNS to buy securities is a form of indirect cost (via inflation) but how is their activities a direct cost?

Thank you in advance for edification

[tom]

Foreign central banks continue to be very cool on Treasuries: last week through Wednesday they sold $2.2b net. Their total activity for six weeks since Nov 10: a mere $2.8b of cumulative net purchases, compared to >$270b in the previous 13 weeks.

[tom]

Meanwhile of the week's $23b of Pomo-created money, $3b turned into increased bank reserves, $2b turned into increased currency in circulation, and the rest collected in Treasury's cash account. 

By the way, Tyler, your numbers that reserves fell by $64b to $994b are some kind of misprint, possibly the Fed's fault, as their site is acting funny. According to what I'm getting reserves stand at $1054b, which makes a hell of a lot more sense.

[putbuyer]

Clicked add on ZH for APMEX. For the first time ever I done bought some mother fuck'n silver. None for me as every one I am giving gifts to - both old and young, are getting the same thing. All the stress of having to go shopping is lifted. I feel great! LOL

[poydras]

So the UK goes from 108 to 478 in one year.  I call BS!

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/...

[Mr Lennon Hendrix]

Bernanke ruined the, "He can print to infinity" joke, didn't he?

[RobotTrader]

Amazing how PALL, SLV, CEF have barely sold off.

Yet the mining shares like AEM were brutalized.....

Never in my life have I seen such lack of conviction in a stock sector.  These guys cut and run for the hills immediately.  Investors should definitely stay with physical bullion and forget about gaming these mining stocks.

Look how nice the CEF chart is.

[Sudden Debt]

400$ for each American man, womand and child every month from their wallet.

HOW GENEROUS!!

[frugartarian]

There's no turning back , divert all power towards weapons systems. Fire fire fire!